Life Insurers commit to improve processes for consumers with experience of mental ill-health

The new Life Insurance Code of Practice, produced by the Financial Services Council (FSC), will increase protections for people with a current or past mental health condition.

‘Life insurance products provide an important way for people to protect their future financial security, but they are often more difficult to access for people who experience mental ill-health because of long-standing discriminatory practices in the industry,’ said PIAC Senior Solicitor Ellen Tilbury.

‘The new code recognises the particular vulnerability of consumers with experience of mental illness and provides improved protections for those consumers.’

New provisions in the Code, which will come into effect on 1 July 2023, include:

  • Ensuring no new policies contain blanket exclusions for mental health;
  • New commitments to recognise vulnerability and provide additional support and assistance;
  • Recognising the unique needs of people who disclose a mental health condition to an insurer, including new commitments:
    • not to decline applications for insurance before properly considering the history, severity or type of condition disclosed;
    • to take into account individual circumstances;
    • to manage risk through premiums, exclusions and other mechanisms where possible rather than declining cover;
    • to give reasons for decisions to decline cover or offer cover on alternative terms; and
    • to explain alternative terms and the process for requesting amendment;
  • New commitments to ensure underwriters have appropriate skills and training, including in anti-discrimination laws;
  • New commitments to limit the use of surveillance and stop it where there is evidence of negative impacts on health.

‘PIAC is pleased to see that the new Code of Practice includes several new provisions that address some of the systemic discrimination experienced by people with mental illness who seek to access life insurance products. Many of these are changes PIAC has recommended and represent a real step up from the previous Code introduced in 2017.’

Importantly, there will be no new policies using blanket mental health exclusions. The changes also necessitate a fairer approach from insurers in the steps they take to assess applications for insurance where applicants disclose a mental health condition.

The code is accompanied by a specific Appendix setting out the measures in the Code which support customers experiencing a mental health condition.

‘We commend the FSC and its members for taking these important steps towards making insurance fairer for people who have or will experience a mental health condition,’ said Ms Tilbury.

Ms Tilbury also said ‘However, there is still a long way to go for the industry to eliminate stigma and unlawful discrimination against people with experiences of mental ill-health. Overly broad mental health exclusion clauses are routinely applied to life insurance products where a person discloses a mental health history, even, for example, attending a counsellor, or a temporary experience of depression and anxiety. Insurers need to show they are basing their decisions on robust and up to date evidence regarding the risks associated with mental health conditions.’

While the new Code is a welcome change, it will not address the lack of transparency in the data relied on by insurers to discriminate, or the underwriting approach used by life insurers that does not adequately differentiate between conditions. Unfortunately, the new Code also omits an important explicit commitment made in the previous Code to comply with anti-discrimination laws in decision-making.’

PIAC would like to see greater oversight of insurer compliance with discrimination laws, and an inquiry into the treatment of people with mental health conditions by the insurance industry to address ongoing discriminatory practices.

More information on mental health and discrimination in insurance can be found in PIAC’s 2021 Report.

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